Workiva Inc. (NYSE:WK), the leading cloud platform for assured integrated reporting, has delivered another strong quarter, showcasing the resilience and versatility of its solutions amidst a measured customer buying environment. The company's Q1 2024 results demonstrate its ability to navigate the evolving regulatory landscape and meet the growing demand for transparent financial and non-financial reporting.

Financials

In the first quarter of 2024, Workiva reported total revenue of $175.7 million, up 17% year-over-year. This growth was primarily driven by a 20% increase in subscription revenue, which reached $155 million. The company's professional services revenue remained flat at $20.7 million, as Workiva continues to shift lower-margin setup and consulting services to its advisory and consulting partners.

Customer Base and Retention

Workiva's customer base expanded to 6,074 at the end of Q1 2024, a 5.5% increase from the same period last year. The company's subscription and support revenue retention rate remained strong at 97.8%, while the rate including add-ons increased to 110.6%, reflecting the success of Workiva's strategy to expand its relationships with existing customers.

High-Value Contracts

The company's focus on large enterprise customers is paying off, as evidenced by the growth in high-value contracts. In Q1 2024, Workiva had 1,696 contracts valued at over $100,000 per year, up 24% from the same period in 2023. The number of contracts valued at over $150,000 and $300,000 increased by 29% and 34%, respectively, during the same time frame.

Profitability and Margins

Workiva's gross profit for the quarter totaled $134.1 million, up 20% year-over-year, with gross margin improving by 220 basis points to 76.4%. This margin expansion was driven by improved leverage in compensation and cloud computing costs. The company's operating expenses increased by 8% compared to Q1 2023, but the focus on process automation and efficiency helped drive a 610-basis point improvement in operating margin, resulting in an operating profit of $6 million.

Liquidity

The company's strong cash flow generation continued in Q1 2024, with operating cash flow of $24.8 million and free cash flow of $24.6 million, representing a free cash flow margin of 14%. Workiva ended the quarter with $838 million in cash, cash equivalents, and marketable securities, providing ample liquidity to fund its growth initiatives.

Business Overview

Workiva's performance in the first quarter was underpinned by its continued success in the Environmental, Social, and Governance (ESG) reporting market. The company's ESG solution was a top booking solution for the seventh consecutive quarter, with several notable wins, including a Fortune 50 telecommunications company, a privately held European-based retailer, and a U.S.-based Fortune 500 global payments company.

The company's financial reporting solutions also contributed significantly to new logo and account expansion deals, with highlights including a mid-six-figure new logo deal with a U.S.-based privately owned hedge fund, a multi-six-figure deal with a South American bank, and a multi-solution platform purchase by an Australian bank.

Workiva's Governance, Risk, and Compliance (GRC) offerings also gained traction, with the company signing new logo deals with an International Specialty Insurance and Reinsurance Group, a European-based pharma and medical supplies company, and a European-based automotive parts manufacturer.

Recent Developments

The regulatory landscape continues to evolve, with the Securities and Exchange Commission's (SEC) adoption of its climate disclosure rule and the European Union's Corporate Sustainability Reporting Directive (CSRD) driving increased demand for Workiva's solutions. The company is well-positioned to capitalize on these regulatory changes, as it stands ready to support its clients with the new XBRL taxonomy requirements for sustainability disclosures.

Outlook

Looking ahead, Workiva has provided guidance for the second quarter of 2024, expecting total revenue to range from $174 million to $176 million and non-GAAP operating income between $2 million and $4 million. For the full year 2024, the company expects total revenue between $719 million and $723 million, with subscription revenue growth of slightly over 16% at the midpoint. Workiva has also increased its full-year non-GAAP operating income guidance to a range of $27 million to $31 million.

Conclusion

Workiva's resilient performance and forward-looking guidance underscore the company's ability to navigate the evolving market conditions and capitalize on the growing demand for its assured integrated reporting platform. With a strong customer base, a diversified product portfolio, and a focus on operational efficiency, Workiva is well-positioned to continue its growth trajectory and solidify its position as the leading provider of cloud-based reporting solutions.